Looks like your next auto loan may not be vetted by the Consumer Financial Protection Agency, or CFPA, being cooked up in Washington. The excellent Annie Lowrey over at The Washington Independent reports today that the dealer exemption made it into the conference report, the document created by negotiations between the House and the Senate:
President Obama has walked back his promise to veto the bill if auto dealers are exempted. And yesterday, House and Senate negotiators agreed to exempt them. "The political reality is that those of us who have fought against an auto dealer carve-out can't prevail," Rep. Luis Gutierrez, D-Ill., said.
Instead, Senate Democrats have proposed holding auto dealers to CFPA regulations through a Federal Reserve-enforced "truth in lending" rule. The Federal Trade Commission would have authority over auto dealers. The CFPA would have no direct oversight, except over a few big companies that provide their own financing, like CarMax.
This is a big victory for the National Auto Dealers Association, which argued CFPA oversight would be a big burden on dealerships that had little to do with the financial crisis that spurred the financial regulation overhaul in the first place. It's also no surprise, seeing as the measure was included in the House version of the bill from the get-go and the Senate approved a "motion to instruct conferees" to include the exemption before the conference even began.
On balance, I think it's a loss for consumers. Sure, buy here, pay here lots -- the usual suspects for predatory lending in the car business -- will be overseen by the CFPA, and so will the banks that ultimately create the loan products auto dealers offer to customers. And I have no doubt that many dealers will continue to treat customers fairly and ethically in the Financing and Insurance room where an auto loan is typically hashed out.
But a car purchase is a big deal -- one of the biggest purchases most people will ever make -- and it's easy to get in over your head. I know it probably would have been a pain for dealers to have another layer of Federal oversight, but to me it makes little sense to create a financial watchdog agency and then exempt businesses that broker billions of dollars worth of consumer loans every year.
What do you think?